My Employee Invented It. Who Owns the Rights?

By Neetal Parekh on October 13, 2009 11:50 AM

Your small business is staffed with bright, talented employees who are always thinking out of the box. That's a good thing. One of your employees innovates a product while in the staging room, perhaps improving upon an existing design or fashioning an entirely new one. That could be excellent. But considering the process you went through for securing the patent and intellectual property rights for the original product, you can't help but wonder... who owns the rights on the employee's innovation?

The employer generally has a nonexclusive license to use an employee-designed invention that was created in the course of employment.

The concept is termed the "shop right doctrine" and it is the legal feature that allows employees to own employee inventions but gives the employer rights to use them, i.e. without having to pay royalties. This applies to scenarios in which the employee created the invention outside the scope of his or her duties. The equation shifts if the employee was hired for the purpose of creating a new product or improving upon an existing one.

You may be wondering, what about patents?

As an employer, you can obtain an agreement from the employee or independent contractor to assign any patents developed while on employer's business.

Courts have upheld such agreements, including trademarks and other intellectual property rights.

If you find yourself in this position, you may want to contact an attorney experienced in employment law and familiar with intellectual property rights. There is nothing like a novel invention to keep your business fresh, but you want to make sure your company has adequate rights to profit from the new concept.